When it comes to talking about providing for the inevitable and making plans for distribution of assets and end-of-life issues, not many enjoy discussing their mortality. The truth is, there is no greater bequest to the people who will grieve for the departed than to spare them the agony of trying to guess what he or she wanted in terms of end-of-life medical decisions, organ donation, funeral arrangements and distribution of assets. This article will discuss wills, living trusts and planning ahead.
Although this very rarely happens, the best time to draw up a will distributing property after a person dies is the moment the assets start accumulating. Even when someone is in the best of health in the prime of life, accidents can happen. Nobody wants to force the next of kin to rummage through belongings and bank security boxes when they have just received the worst information possible. The best practice is to make a will, keep it valid and up to date as circumstances evolve and make sure everyone concerned knows where to find it.
What is a will?
A will and/or testament is an instrument by which the testator appoints an executor, someone to manage his or her estate, and provides for the distribution of property after death. Traditionally, the term, "will," has been used strictly for real estate while "testament" refers to personal property. A will may also contain a testamentary trust effective upon the death of the testator. There are different types of will. A mystic will, for instance, is sealed until death. A serviceman's will, belonging to a person in active military service, lacks certain formalities, particularly in England.
Why is it necessary to have a will?
In the absence of a will, your property will be distributed according to local laws. the decedent's property may not be distributed according to their wishes. The estate may legally pass to a spouse, rather than the chosen beneficiary, i.e., the family cat or a charity. Relatives may be stuck trying to guess what was wanted for the funeral service. This can put a lot of pressure on squabbling relatives whose attention would be better directed toward more positive things. Famous people who have died intestate (without a will) have included American presidents Abraham Lincoln, Ulysses S. Grant, Andrew Johnson and James A. Garfield.
What are the requirements of a will?
A testator who is above the age of majority and of sound mind may compose a will with or without the help of a qualified attorney. There are major pitfalls in going it alone. For one, the testator will not be around after the fact to resolve any discrepancies or confusion surrounding specific wishes. A common error made by do-it-yourself inclined people is to appoint a beneficiary as a witness. This has the effect of disinheriting the witness.
A testator must:
- "Publish the will" - This involves declaring that the existence of a will and clearly identifying the author of the will.
- Revoke all previous wills and codicils (amendments to the original will).
- Demonstrate soundness of mind and the capacity to dispose of the property.
- Sign and date the will in the presence of two or more witnesses who are not beneficiaries of the will. The document must be signed at bottom of the last page the end of all of the text; otherwise, any text appearing after the signature will be disregarded.
There may be various peculiarities specific to the jurisdiction in which the will is valid. It really is best to secure the services of a qualified attorney.
A living will, also known as an advance healthcare directive, advance directive, personal directive or advance decision, is a statement that specifies what action is to be taken regarding a person's health in the event they become unable to do so because of illness or incapacity. In it, an individual would usually appoint an agent to act on their behalf. Unlike a will, it does not provide instructions on the disposition of property. It relates to all future medical treatment, not just that which is life-saving. While a living will is not required to be written down (apart from the case where a patient refuses life-saving treatment), a written document is less likely to be challenged. This spares the family confusion under already tense circumstances.
A living will is prepared well in advance of any anticipated need to invoke its contents. While this is good, because it clearly lays out the wishes of the individual while they are in good health and of sound mind. There are pitfalls, however. It needs to be kept in a safe place for as long as 15 or 20 years where it is easily accessible in a hurry should the need arise. It needs to be updated in the face of changes in the person's wishes. To combat these difficulties, the U.S. Living Will Registry was established in 1996.
The registry stores these living wills electronically and makes them available on request to healthcare providers and hospitals all over the country, 24 hours a day, seven days a week. Each registrant has an online account from which they may review or amend the document wherever and whenever they want, even on their smartphone! Registrants are contacted each year to verify their emergency contact details, ascertain whether there are any changes to the directive and confirm that it remains in force and has not been revoked. For further information, including the applicable laws in your state, please refer to the U.S. Living Will Registry website at the address below.
A living trust may also be known as a grantor trust or a revocable inter vivos trust. At any time during the trustor's lifetime, it may be revoked or amended provided the trustor is competent to do so. A living trust is a written legal document between the trustor, the owner of the assets covered by the document, and the trustee, the individual who is appointed to manage those assets. A living trust may be the most important aspect of an estate plan. A trustee is a fiduciary, someone who is subject to strict responsibilities, who occupies a position of confidence and trust and held to higher standards than if they were managing their own property. A living trust provides for the smooth transfer of assets to the individuals or charities who are the beneficiaries of the trust in the event the trustor become incapacitated or simply does not wish to manage the assets directly.
This type of arrangement is not for everybody. If a person frequently buys, sells or refinances real estate holdings, they would not want to be encumbered by a trust. If they are young, healthy and have few assets, living trust is not appropriate. On the other hand, someone facing incapacity or a shortened lifespan really ought to have a living trust. It will enable the smooth management or transition of assets to the designated beneficiaries in the event of a sudden illness or accident.
There are certain caveats to a living trust. They are not under the direct supervision of the courts. As a result, assets may be at risk from imprudent or incompetent management by the trustee. In some cases, the cost of setting up the trust may be significantly higher than the cost of drafting a will. Once created, the trust will require the input of funds. Bank accounts, bond accounts or stocks must be transferred; deeds to real estate need to be prepared and documented. Finally, a living trust does not take the place of a will. This is still required.
Contrary to popular belief, unpleasant circumstances cannot be avoided simply by neglecting to make preparations for them. No one is invulnerable to sudden illness, accident or death. Making plans for how assets should be distributed, burial arrangements and decisions about end-of-life health care saves time and aggravation for those who are responsible for tying up the loose ends when the time comes. While a person is still well and clear-headed and not under the pressure of illness or recovering from a severe accident, that is the time to start gathering all the necessary documentation relating to assets. Titles, deeds, details of creditors, insurance policies, etc., should be gathered together and put in a safe place where the remaining spouse, children or the executor of the will can find them. Clear wishes should be stipulated about organ transplant, pain relief, the point at which someone no longer wishes efforts to be made to prolong life, etc. For dependent children, it is particularly important to specify instructions on how they are to be cared for in the event both parents are unable to do so. Provision should also be made for their financial upkeep.
Planning ahead does involve facing unpleasant realities. Nobody wants to confront the prospect of illness, life-changing injuries or death. For those with strong feelings about distribution of assets, managing them in the event of incapacitation and preferred treatment, both medically and spiritually, in the event of serious illness or death, planning ahead will ensure that these wishes are carried out. Perhaps more importantly, it spares the ones left behind the uncertainty and pain of having to make difficult decisions on the deceased's behalf, decisions that may not be in accordance with their wishes of the departed.
Furthermore, bereavement puts pressure on delicate family relationships. By making it clear how affairs should be dealt with, potential conflicts are spared from arising between or among the relatives if they do not see eye to eye on how things should be managed.
Create a Successional Plan
You might think that deeding your property or business to your children in a will is enough to ensure it will remain in the family, but that’s not necessarily the case, especially if you own forestland or farmland. In some situations, estate taxes can make the land unaffordable, and you can’t assume your children will value the land as you do: You see a working forest, but they may see dollar signs because of development potential.
If you want to see the land remain a working forest or farm beyond your lifetime, it is vital that you work with your children to create a successional plan. It is never too late to start drafting a successional plan, and there are state resources you can draw upon for help. Oregon State University’s Ties to the Land Initiative provides helpful resources to help you approach the discussion. Many states also have a local extension office which can assist you in finding resources to ensure your forestland remains as a forest.